Hong Kong’s Exchange Operator Slumps as Profit Misses Estimates

Hong Kong Exchanges & Clearing Ltd. headed for its steepest slide in two weeks after the bourse operator’s profit missed estimates.

Shares dropped 4.4 percent to HK$206.60 as of 2:56 p.m. in Hong Kong. While first-half net income surged 73 percent from a year earlier to HK$4.1 billion ($529 million) on higher turnover, it fell short of the HK$4.48 billion expected by analysts. Revenue also missed expectations, rising 48 percent to HK$6.85 billion compared with the HK$7.29 billion median estimate of three analysts.

Hong Kong Exchanges surged 59 percent in the first half as trading volume jumped amid an equity rally and after China expanded the number of local fund managers eligible to buy Hong Kong stocks through the link with Shanghai. Average daily turnover almost doubled from a year earlier in the first six month, the exchange said in a statement. The Hang Seng Index fell 2.4 percent today.

“Investors are disappointed because first-half earnings was a miss,” said Daniel So, a strategist at CMB International Securities Ltd. “Even before the results announcement the stock was down on weak market sentiment. The miss exacerbated the loss.”

Since surging to a record high in May, the exchange’s shares sank as much as 34 percent as turnover dwindled and the stock started to look expensive. It trades at 47 percent reported profit, compared with a global average of about 26, according to data compiled by Bloomberg.

Hong Kong’s benchmark Hang Seng Index surged 20 percent this year through its high in April. It has since slumped 16 percent as a rout in mainland shares spreads across the border into the city.

Investors are also still waiting for details of the bourse’s plan to link with the Shenzhen stock exchange for further cross-border trading. Chairman Chow Chung Kong said in April it planned to announce the start date in the first half of this year. The exchange is working with regulators and mainland exchanges to complete the link, he said in today’s statement.

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